Would You Pay Cash or Use a Loan for new 30k roof?

7 Replies

I'm putting on a new TPO roof on a commercial building, that has retail on the bottom and apartments on top.

It's tempting to just pay it off in full with cash, but I'm wondering if I should get a loan instead and keep more money for future improvements.

tough to give you much input here without a better understanding of your situation and goals.

Tillman Fertitta the Billionaire in a video once mentioned he likes to load up on good debt when lenders are giving favorable terms and higher LTV's.

His thought is that you save up as much cash as possible because in a down turn lenders TIGHTEN on what they lend on and what percentage of LTV. Since you have more cash available you can then even with limited financing available in a down turn can take advantage of low priced deals.

In another example if you have very to little debt on properties when lending dries up will be harder to access a good amount of your equity with a loan to take advantage in down cycle to buy more properties.

No strategy is fool proof  but does make sense.


I second @Joel Owens comment. If you can get favorable terms, and the property can easily cover the debt service, then finance it. Now if you are going to be paying 10-12% or higher rate on the loan, I would probably pay cash.

You base your decision on how much value you place on your cash. From a business perspective leverage is good, it increases cash flow based on investors being able to achieve higher returns on their money than prevailing mortgage interest rates. If you value your cash at below the cost of a loan pay cash to repair. If you have a better use/higher return available investing elsewhere then the wise decision is to use a loan for repairs. 

Conservative investors see all debt as bad and as such hoard cash in real estate, wise investors better utilise their money through investing.

@Aaron Hirshberg What terms would you get on a loan to fix the roof? If you were to invest that cash, would you get better returns than what the bank would charge you for the loan? How important is this cash for you? Would you just keep it in a savings account, waiting to perform improvements?

@Aaron Hirshberg Hard to answer without knowing more about the property and your goals. But, money is cheap right now so that may be a great option for you at the moment.

Thanks for the advice. Ultimately I decided to get a loan and keep cash for another opportunity.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here